MUMBAI: Foreign portfolio investors sold a net ₹35,861 crore of Indian shares in September, turning sellers after buying in July and August, according to depository data reported by All India Radio on October 4. Over the same weeks, India's foreign exchange reserves fell sharply as the Reserve Bank of India sold dollars to steady the rupee.
The outflow was concentrated in the secondary market. Foreign investors sold ₹45,537 crore of shares on the stock exchanges, as geopolitical uncertainty, elevated US bond yields and high crude oil prices weighed on their appetite for risk. They kept investing in new issues, however, putting ₹9,676 crore into the primary market during the month.
They also pulled money out of Indian debt. Outflows from bonds under the Fully Accessible Route came to ₹10,431 crore in September. Foreign investors withdrew ₹5,247 crore through the General Limit route and ₹5,049 crore through the Voluntary Retention Route.
By the end of the month the equity outflow had more than doubled from the ₹17,131 crore recorded by September 27.
The Reserve Bank's weekly data show what defending the currency has cost. Reserves fell by $18.3 billion to $747.5 billion in the week ended September 25, according to figures reported by All India Radio on October 2. Foreign currency assets, the largest component, dropped by $15.5 billion to $615.4 billion, and gold reserves by $2.5 billion to $108.7 billion. Special Drawing Rights fell by $97 million to $18.64 billion, and India's reserve position with the International Monetary Fund by $86 million to $4.8 billion.
A week earlier, reserves had fallen by $14.9 billion to $765.9 billion in the week ended September 18, the steepest weekly drop since November 2024, the Free Press Journal reported. That week, foreign currency assets fell by $14.8 billion to $631 billion, while gold reserves rose by $68 million to $111.3 billion; Special Drawing Rights declined by $106 million to $18.7 billion and the reserve position with the IMF by $27 million to $4.9 billion. Together, the two weeks took $33.2 billion out of the reserves, which had stood at $780.8 billion on September 11. Gold holdings, which had risen in the first of the two weeks, fell by $2.5 billion in the second.
The fall comes after a sharp rise. Reserves reached a record $785.7 billion in the week ended September 5, helped by foreign currency inflows through the RBI's FCNR(B) deposit swap scheme. That concessional swap window had mobilised $143.6 billion through September 18, the newspaper reported. Reserves had dropped as low as $666.9 billion in the week ended June 26, when the central bank sold dollars during the West Asia crisis.
The rupee has been under pressure from higher crude oil prices and US Treasury yields, which make dollars more expensive. The RBI has used spot and forward market operations to manage what it calls excessive volatility in the currency, and dollar-rupee sell/buy swaps to manage liquidity and support its foreign exchange operations, the Free Press Journal reported.
Part of any weekly change in the reserves also reflects valuation: the dollar value of the euros, pounds and yen the RBI holds moves with exchange rates, the Free Press Journal noted.
The same forces, geopolitical uncertainty, high US bond yields and expensive crude oil, are the reasons All India Radio gave for the foreign selling of shares, even as foreign investors kept subscribing to new share sales.
The next reserves figure, for the week ended October 2, is due on Friday.
